Tired of Boycotts and Supply Chain Disruptions NIO is now Developing its own Car Chips

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For Chinese car manufacturers, punitive tariffs on imported car chips may be the lesser evil. The real threat is the unavailability of these critical components, which could halt production entirely. To avoid this scenario and maintain a competitive edge globally, automaker NIO is reportedly shifting towards in-house chip production.

This scenario exemplifies the rapid transformation within the automotive industry. Instead of showcasing a new engine or an advanced gearbox, the automaker's CEO proudly highlighted the development of a proprietary chip for autonomous driving—signaling a shift in focus from traditional mechanics to cutting-edge technology. 

We are talking about NIO and its founder and CEO William Li, who recently announced at the "NIO Tech Day" that the "Shenji NX9031" chip developed by his e-car start-up has left the design stage behind and is now being prepared for series production.

In China, semiconductors are rapidly becoming the most important distinguishing features with which car brands are trying to set themselves apart from the competition in the age of electrification and ADAS driving assistance. While between 600 and 700 chips are installed in modern cars with combustion engines, the figure for e-cars is already 1,600 and for advanced, "smart e-cars" up to 3,000 chips, according to the Chinese manufacturers' association CAAM. At the same time, the technical requirements in terms of computing power and complexity of the semiconductors are increasing.

Chip for autonomous driving has left tape out behind

NIO's new chip, which is being developed for autonomous driving functions, has passed the "tape out" phase, according to the company founder. This means that the design phase is largely complete and, following further tests, production can then begin in small, and later in larger series. The new NIO model "ET9" is set to be launched on the market from the first quarter of 2025.

Like many other car manufacturers, NIO made initial plans for the in-house production of automotive chips around four years ago, when the coronavirus lockdowns and later the chip boycotts imposed by the USA on China triggered supply bottlenecks in the Chinese automotive industry. According to the Chinese automotive portal 36.kr, NIO has built up a chip development team of 800 experts since 2020, which is also working on another chip of its own in parallel with the Shenji NX9031, the "Yangjian" for light detection and distance measurement for lidar sensors.

Too good to be true?

If NIO's founder's claims are independently verified, it seems the development team may have exceeded their own targets. The chip, reportedly nearing mass production, is said to be the world’s first automotive chip based on 5-nanometer technology—something neither Tesla nor Hyundai have achieved, let alone with their own manufacturing. This has led analysts in China to discuss "technological redundancy" and question the strategic direction of NIO.

Critics argue that the development of this chip with more than 50 billion transistors and LPDDR5x memory speeds of up to 8.533 MT/s is currently still unnecessary. The development of autonomous driving is progressing rapidly and the redundancy enables important new leaps in development, argue NIO spokespersons.

Another key reason manufacturers are developing their own automotive chips is the potential for cost savings. Last year, William Li stated that one of NIO's new chips could replace four of Nvidia's "Drive Orin SoC" chips. However, the specific computing power of the NIO chip has yet to be disclosed. 

Xpeng and Li Auto on the move

NIO isn't the only Chinese automaker venturing into chip development. E-car startup Xpeng has reportedly just completed the tape-out phase for its own automotive chip, according to 36.kr. Meanwhile, Li Auto is expected to debut its in-house chip, codenamed "Schumacher," later this year.

BYD, China's and the world's largest manufacturer of electric cars, founded its "BYD Microelectronics" division back in 2004 and can now build all kinds of automotive chips, from control MCUs and power semiconductors to chips for sensors, optical electronics and IGBTs. However, BYD has so far left chips for smart driving functions to others.

At NIO, the focus extends beyond securing the supply chain or cutting costs—it's about competing on both domestic and international levels. "Only with strong technological capabilities can we dominate the market and minimize damage, even when faced with targeted attacks," reports CNEVPOST, highlighting this strategic shift in the Chinese automotive industry. (sb)

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